The Troubling Persistence of Policy Clichés

A cable TV monopoly is imminent and high prices loom, at least as far as the Associated Press is concerned.

That was the angle of a widely syndicated AP story last week reporting that in the second quarter of this year, landline phone companies lost broadband subscribers while cable companies gained market share.

Beneath the lead, Peter Svensson, AP technology reporter, wrote:

The flow of subscribers from phone companies to cable providers could lead to a de facto monopoly on broadband in many areas of the U.S., say industry watchers. That could mean a lack of choice and higher prices.

In the news business, the second graph is usually referred to as the “nut” graph. It encapsulates the significance of the story, that is, why it’s news.

It’s interesting that Svensson, with either support or input from his editors, jumped on the “de facto” monopoly angle. There could be any number of reasons why cable broadband is outpacing telco DSL, beginning with superior speed (to be fair, an aspect noted in the lead).

However, AP defaulted to the clichéd narrative that the telecom, Internet and media technology markets inevitably bend toward monopoly (see here, here, here and here for just as a sample). Moreover, that the money quote came from Susan Crawford, President Obama’s former special assistant for science, technology and innovation policy, and a vocal advocate of broad industry regulation, was all the more reason it should have been countered with some acknowledgement of the growing data on how consumer behavior is changing when it comes to TV viewing. Arguably, at least, the cable companies, far from heading toward monopoly, are sailing into competitive headwinds stirred up by video on demand services such as Netflix, Hulu and iTunes.

What numbers does AP base its monopoly supposition on? Their own tally from separate phone company reports finds that the eight largest phone companies in the U.S. collectively lost 70,000 broadband subscribers between April and June. Meanwhile, the top four public cable companies reported a gain of 290,000 subscribers. Assuming most of the 70,000 the telcos lost was DSL-to-cable churn, that still leaves cable with a net gain of 220,000 broadband subscribers (although some likely switched from satellite). So another way to read these numbers is that U.S. broadband subscriptions increased by nearly a quarter-million households in the second quarter. Too much of a smiley face? OK.

Then consider this:

Balancing the AP’s reporting of cable dominance is the Convergence Consulting Group’s finding that between 2008 and 2011 2.65 million people have dropped cable entirely in favor of alternative methods. Separate research from Nielsen tracked with this, finding that the number of households paying a multichannel provider last year declined by 1.5 million, which suggests the rate of cord-cutting is increasing.

In an excellent analysis of these trends, Engadget’s Brad Hill, no fan of cable, looks at how the cable companies are slowly getting boxed in between the on-demand alternatives and their traditional tiered pricing model, which day-by-day appears less and less price-competitive.

My purpose here has not been to pile on AP’s or the mainstream media’s technology reporting. But the danger in defaulting to the monopoly angle reinforces erroneous perceptions that persist in policy circles. I can’t predict how it’s going to turn out, but if consumers are to be served, broadband providers, as well as companies in any other segment of the digital economy, need the freedom to respond to market conditions. Regulations that restrain now-competitive companies as if they were once-and-future monopolies is not going to promote innovation. If progress is to be made on broadband policy that truly benefits consumers, lawmakers and regulators have approach the industry as it exists today—not as it was one, three, five or ten years ago. I’ll be the first to say legacy perceptions are hard to dismiss. But responsible reporting and analysis contributes to greater clarity and does not reinforce outdated notions.

Steven Titch / Steven Titch (@stevetitch) is an independent telecom and IT policy analyst. His policy analysis has been published by the Reason Foundation and the Heartland Institute and covers topics such as municipal broadband, network neutrality, universal service, telecom taxes and online gambling.
Titch holds a dual Bachelor of Arts degree in journalism and English from Syracuse University. He lives in Sugar Land, Texas. He burns off energy running 5K races, is an avid poker player, and likes to mellow out in cellar jazz bars.